Alderson: What unique problems do foreign promoters face when promoting shows in China? In other words, what problems are particular to China as opposed to being prevalent in developed markets?

Davis: The main problem or barrier to foreign companies operating as show promoters in China is that neither foreign entities nor China-registered WFOE companies can legally operate as sole entities and apply for performance permits (批文) from the China Ministry of Culture. This can only be done in partnership with Chinese domestic companies, either in terms of a formal joint venture or a temporary partnership.

Another serious problem is distortion of the market brought on by promoters (both foreign and local) who offer fees to international acts that are not in line with the realities of the market. In other words, many international acts are being paid premium fees for shows here when there is very little chance for the promoter to make that money back because they are hobbyist promoters with family or government money and have no real understanding or desire to help create and develop a sustainable environment for shows in China.

The other main problem is the entire 批文 system set up by the Chinese government which requires extra lead times for promoters to confirm shows before they can even begin to advertise, promote or market those shows and then even longer lead times until tickets may be sold, for those events of a size (e.g. arena, stadium, festival shows) requiring Public Security Bureau (“PSB”) approval. This process can require anywhere from 20-40 days.

Alderson: How could the live entertainment sector in China be improved to encourage more participation by foreign promoters?

Davis: The answer would partly be the conclusion of the last White Paper chapter:

“streamline and clarify relevant procedures and regulations, not only for the benefit of live entertainment venues, producers, and artists, but also for the benefit of China’s cultural industry overall.” That is a good place to start.

After that, I would suggest there also needs to be not just a streamlining and clarifying of regulations, but also a reduction in procedures and regulations. The legal process for having shows approved — particularly large shows — is nearly incapacitating. The lead time for these approvals can be crippling. It simply takes too long and it is often hamstrung by something as banal as one of the government officials who needs to sign off on the approval being out of Beijing and needing to wait until he is back to physically sign the permit. It is not easy to do shows here — that is why there are so few of us here doing it.

This is not just relevant to foreign promoters but to everyone working in the industry.

Alderson: What particular problems beset the advertising and promotion of live performances in China?

Davis: A lack of non “pay-to-play” media (i.e. media that are actually interested in stories, rather than what they get paid to promote.)

Lack of real media interest in anything other than mainstream music-celebrity driven stories.

Also the previously mentioned problems of not being able to legally promote or advertise a show until Ministry of Culture permits are received.

Alderson: What particular problems beset the selling of tickets to the public in China?

Davis: The problems are not dissimilar to those in the U.S. There is a robust scalped ticket market made up of a combination of fake tickets and tickets that have “leaked” from the venues, ticketing companies and government agencies that receive free tickets.

Otherwise, the main problem is still a relatively limited market for live music even in the major metropolitan areas of China, including Beijing and Shanghai. Ticket prices remain extremely high relative to the purchasing power of ordinary people.

I think there is also the lack of a completely secure, transparent and trustworthy ticketing service. We could definitely benefit from the development of a secure e-ticketing platform.

Alderson: How difficult is it to book large, high quality venues and what are the main difficulties in doing this?

There are only two real high-quality venues in the country, both of which were set up by AEG and one of which is still managed by AEG. The Beijing venue — the MasterCard Center — was originally built for the 2008 Beijing Olympics. The Shanghai venue — the Mercedes Benz Arena — was opened in 2010. All of the other large venues are old and were originally indoor sports arenas and were not really built to do concerts or live entertainment events. The two aforementioned venues can be difficult to book simply because they are very busy.

However the difficulty lies not in the “booking,” but in the logistics of actually putting a show on at that level and in dealing with the vagaries of the system and specifically with the PSB.

Alderson: How good are local Chinese sound engineers, technicians and crew?

Davis: There are several good ones working out of Beijing, but they are few and far between. There are several foreign sound engineers here now who are in great demand. But overall there is a huge gap in the maturity of the live event industry here. There is top level gear here, but a limited number of qualified people to use the gear properly.

According to Mathew (who represents Nathaniel’s companies, along with a number of other companies involved with China entertainment), Nathaniel’s assessment is entirely consistent with the way that foreign involvement in live entertainment is classified by the Chinese authorities. As with other forms of entertainment, foreign involvement in China’s music industry is restricted. Live performances are considered particularly sensitive given the tendency of some foreign performers to publicly support causes or individuals that are “off limits.”

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About China Law Blog

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.